In this edition of VantagePoint, we discuss the potential implications of negative interest rate policy (NIRP). In addition, we consider the potential for sustained outperformance in value stocks, which experienced a sharp revival in the second half of the first quarter, noting that we would continue to own value in portfolios, but would not broadly overweight just yet. Energy-related assets and emerging markets equities seem a better way to obtain value-based exposures today. At the same time, we are keeping a close eye on credit markets in search of value opportunities. Finally, we review the outlook for Treasury Inflation-Protected Securities (TIPS), which we believe offer modest opportunity to outperform relative to nominal Treasuries should headline CPI follow the increase experienced in some of the stickier prices in the index.

In this edition of VantagePoint, we briefly discuss economic growth prospects, reaffirming the need to be cautious about cyclically oriented assets in an environment of low growth and severe weakness in some corners that could potentially spread. In other words, we remain patient in evaluating opportunities and set high standards for taking cyclical risk. We review our outlook for cheap assets that keep getting cheaper (commodity-related assets and emerging markets equities), evaluate the case for high-yield bonds as yields and spreads have widened, and revisit our global developed markets equity recommendations.

Advice in Brief The consensus view that a global recession is not imminent seems reasonable, but the possibility cannot be ruled out. This keeps us looking for bargains, but leaving the bar high, as most assets are not cheap and what is cheap is generally cyclically oriented. Asian emerging markets or Asia ex Japan equities…